Surge pricing, or dynamic pricing, has become a common tool used by companies to adjust prices based on demand. This tactic is often used in industries such as transportation and travel, where prices can fluctuate based on the time of day or the proximity to the travel date. Despite being a common practice, surge pricing has stirred up controversy and backlash from consumers when implemented poorly.
One example of backlash was seen when Wendy’s announced plans for dynamic pricing, which would have increased prices during peak hours. The company quickly backtracked on the decision after facing criticism from customers. Similarly, JetBlue faced backlash when it rolled out dynamic pricing for checked bags, leading to negative reactions from customers who were already paying higher prices before the official announcement.
On the other hand, companies like Amazon have successfully implemented dynamic pricing by using real-time data to adjust prices frequently. This approach has been less controversial, as consumers are used to the idea of prices fluctuating based on demand. However, in a time when prices remain high across various industries, surge pricing can feel like a scam to consumers who are already feeling the pinch of rising costs.
While dynamic pricing may not be inherently unfair, the perception of profiteering can taint consumers’ views of the practice. Marco Bertini, a marketing professor at Esade business school, believes that transparency is key when implementing dynamic pricing. He argues that businesses need to clearly communicate the benefits of dynamic pricing to customers in order to build trust and avoid backlash.
Bertini explains that dynamic pricing is essential in industries like commercial aviation, where tight margins require the ability to vary prices based on customers’ willingness to pay. Without some level of dynamism in pricing, industries like airlines would struggle to survive. While some businesses may have gone overboard with dynamic pricing, Bertini believes that a balanced approach that benefits both businesses and customers is essential for long-term success.
In conclusion, surge pricing may feel like a scam to consumers due to a combination of high prices, lack of transparency, and poor implementation by businesses. While dynamic pricing is not inherently unfair, companies need to be mindful of how they communicate and implement these pricing strategies to avoid backlash from customers. In industries where margins are tight and demand fluctuates, dynamic pricing can be a necessary tool for maintaining profitability and staying competitive in the market.
